The paper focuses on recent Court findings which has given some direction to valuers when considering the characteristics of Public Purpose in Just Terms Compensation matters.
When assessing The Market Value, we need to disregard the impact of the Public Purpose, known as The Statutory Disregard.
The Public Purpose is defined as:
“any purpose for which land may by law be acquired by compulsory process under this Act.”
Both the Drivas and Goldmate cases demonstrates there is no single definition when characterising the relevant Public Purpose.
In Drivas, we were asked to consider whether the effects of the acquisition itself (owner’s actions in relation to the rumoured compulsory acquisition) constituted the Public Purpose.
In Goldmate, we were asked to consider whether the Public Purpose is limited to the particular acquiring authority, or may be broadened to consider a number of authorities acting in concert to achieve the broader Public Purpose.
G&J Drivas Pty Ltd v Sydney Metro [2023] NSWLC 20
Sydney Metro v G&J Drivas [2024] NSWCA 5
The Facts
Prior to the compulsory acquisition the then owner (vendor) was contemplating a multi-level office development (approval granted in 2018) and were continuing to progress their development including preparing a Development Approval to seek additional development floorspace The vendor consider that these works would have contributed to the Market Value of The Land and should be compensatory under the Act.
The vendor contended that they discontinued progressing their proposal in early 2019 when they suspected the Land would be acquired by Sydney Metro. The vendor contended that if it was not for the acquisition, they would have progressed the development to the extent of undertaking demolition and site preparation and entered into construction contracts.
The various assessments of Market Value are summarised below:
Vendor Assessment $200 million
Sydney Metro Assessment $119 million
Valuer General Assessment $145 million
Primary Judgement $170 million
Vendor Assessment $200 million Sydney Metro Assessment $119 million Valuer General Assessment $145 million Primary Judgement $170 million This matter asks the Court (and valuers) to consider whether the change in value (that being the development works that were not progressed) was caused by the Public Purpose.
The Judgement and Appeal The Primary Judge found with the Vendor: if it was not for the Public Purpose, the vendor would have undertaken these works, may have a value under the Act.
Under Appeal, the Appeal Judge rejected the Vendor’s argument.
The Appeal Judge found it was the then owner’s decision to discontinue progressing the development works that led to a devaluation of the land – rather than the proposed acquisition associated with Public Purpose.
Goldmate Property Luddenham No. 1 Pty Ltd v Transport for NSW [2024] NSWLEC 39 The Facts The matter concerned a 31.79 ha of Land situated in Luddenham, near the Western Sydney Aerotropolis. In June 2021, TfNSW acquired some 14.66 ha (The Acquired Land) for the purposes of the Roads Act 1993 (NSW) in connection with the construction, operation and maintenance of the M12 Motorway.
The residual land (17.13 ha) was to be retained by the vendor.
The Land was predominantly upzoned to Enterprise from Rural in October 2020 under the provisions of State Environmental Planning Policy (Western Sydney Aerotropolis) 2020.
The various assessment of Market Value are summarised below: Acquisition Price $33,056,500 Third Party Offer $24,307,366 Vendor Assessment $55, 437,200 TfNSW Assessment $4,000,200 VG Assessment Nil Judgement $9,523,500 Central to the issue is whether the upzoning which presumably would have produced a higher value formed part of The Public Purpose.
What was The Public Purpose of The Acquired Land The vendor argued that the Public Purpose should be limited to the identified purpose of the acquisition (section 177 of the Roads Act) and/or that purpose identified in the Proposed Acquisition Notice (the construction, operation and maintenance of the M12 Motorway).
This would have meant that the valuers were bound to assess the Acquired Land on the prevailing Enterprise zoning; rather than the underlying Rural zoning.
TfNSW argued that the Public Purpose was not isolated to construction of the M12 Motorway, but the broader development of the Airport by the NSW Government that was announced in 2014. This would include the upzoning of The Land.
This would have meant that the valuers were bound to assess the Land on the lower underlying Rural zoning (rezoned two years prior to the acquisition) rather than the Enterprise zoning.
The Judgement The Judge found with TfNSW: the Public Purpose is a composite purpose which to give effect to a number of authorities must act in concert to achieve the purpose. The Public Purpose should not limited to the scope of influence of a particular acquiring authority.
In other words, the upzoning of the Land was considered part of the broader Public Purpose and was to be disregarded in this matter.
Other Considerations Replacement Costs Replacement costs may be compensated under Disturbance if it can be established the then Owner used the Land for their own occupation, business or held the Land as stock in trade.
In Drivas, the Primary Judge found there was an “actual use” of the Land being the identification, acquiring and development of Land. Accordingly, then owners were awarded Disturbance under Section 59 (1)(f).
The Primary Judge awarded $10.8 million for total disturbance costs which included replacement costs of acquiring a replacement property, together with valuation fees, legal costs and other financial costs.
The Appeal Judge found that the owners were not entitled to recover replacement costs as the former owners were not physically required to relocate their business.
Development Properties: Direct Comparison Approach v Residual Land Approach The Courts have stated whilst there is a general judicial preference for the Direct Comparison Approach, the final choice depends upon the comparability of the sales and how subjective any adjustments may be. However, Residual Land Value approach may be limited in terms of the appropriateness and subjectivity of the inputs.Interestingly in Drivas, The Primary Judge found that the Residual Land Value was the preferred methodology given the counter factual assumption that the development was under construction.
Residual Land Must be Valued Having Regard to its Potentialities In Goldmate, the Court needed to consider if there was a reasonable expectation that the Land would be upzoned, if not for the existence of the new Airport.
The Judge took town planner evidence regarding the rezoning potential, if not for the Airport.
It was generally held that Council had identified the precinct as a Growth Area which may have included The Land being upzoned to permit some commercial usage at some stage.
However, the timing of any rezoning is fundamental to the extent of potentiality, if any.
The vendor’s planner believed that a rezoning would have occurred no earlier than 2031; whilst the TfNSW’s planner believed any rezoning would be no earlier than 2046.
On the basis that the valuers largely agreed that potentialities that occurred beyond 10 years were unlikely to affect value, the Judge opined that the Land was to be assessed on its former Rural zoning with no potential for any upzoning.
The vendor’s planner believed that a rezoning would have occurred no earlier than 2031; whilst the TfNSW’s planner believed any rezoning would be no earlier than 2046.
On the basis that the valuers largely agreed that potentialities that occurred beyond 10 years were unlikely to affect value, the Judge opined that the Land was to be assessed on its former Rural zoning with no potential for any upzoning.
